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Epic Wealth through better management of your passive income portfolio epic real estate investing podcast and epic wealth podcasting by Matt Theriault featuring Cash Flow Savvy and Turnkey Real Estate Investing podcastersEpic Wealth presents a series of ways for you to better manage your passive income portfolio. Learn how to use balloon payments as leverage and discover more options available when negotiating a seller financing deal.

Understand why you must control either the price or the terms of your deal and know what to do when balloon payments become due. Shift your mindset for Epic Wealth. Real Estate is the final frontier.


What You Will Learn About Better Management of Your Passive Income Portfolio:

  • What to do when balloon payments become due

  • An option to renegotiate your seller financing deal

  • More ideas for managing your passive income portfolio

  • Why you have more and more options as your portfolio grows

  • Other ways to handle your balloon payments

  • How to use ‘substitution of collateral’

  • Why passive income is the surest path to wealth

Read the Transcript:

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Matt Theriault: Today's episode is sponsored by the Epic Wealth Experience, a live event that presents a revolutionary philosophy for understanding the building of wealth through real estate. You know how some people want to get involve in real estate investing but they don't have the time? They've already got a full time job, they've got family obligations, and/or they're running their own business already. And you know how some people want to get involve in real estate investing, but they don't have a know-how, they don't know where to begin, they don't know what market to invest in, they don't know what type of properties to invest in, and you know how some people want to get involve in real estate investing but they don't have the money? I mean, they're already living paycheck to paycheck, they think they're maxed out on their credit, their monthly overhead is just so high there's nothing left at the end of the month. What all that really comes down to is fear. When any of these conditions are present for someone, fear sets in and it stops them dead in their track, and they do nothing, and tomorrow is the same as it was today.

At the Epic Wealth experience, there's a system in place that helps people get involved in cash flow investment properties from all across the country, and there's also a system in place where an expert will hold you by the hand and walk you through the process from beginning to end, and there's also a system in place that can arrange for people cash flowing investments of zero to no money down. What these systems do is give people the confidence and the ability to move forward and create multiple streams of income so that they can escape the rat race once and for all, living a life of options. I mean, imagine waking up each and every morning getting out of bed because you want to, as opposed to you having to. That's the type of life the Epic Wealth Experience can create for the busiest of people.

Go to EpicWealthExperience.com for more information, and to reserve your seat for the next event. EpicWealthExperience.com. Go to EpicWealthExperience.com.

Narrator: Now, back to creating your Epic Wealth.

Matt Theriault: Balloon payments. Yeah, they got you thinking, don't they? To clarify and to just be certain that we're all on the same page, a balloon payment, it's pretty much what you might guess it to be. It's a large payment, and it can be a really valuable variable to play with when negotiating seller financing. For example, if a seller wants $100,000 for their property, and you determined it's not actually worth much more than that, you can still make this a really good deal for yourself as long as you control the terms, the terms in how the $100,000 is going to be paid back to the seller.

So remember, we put this property in one or two ways. Either by your price and the seller's terms, or the seller's price and your terms. Now since the seller is stuck on their price of $100,000 for their $100,000 property, you've got to take control of the terms. So we'll keep our example from the last segment, being that this particular property is going to rent for $1,200 per month, and after all the property's expenses are taken care of, we're left with $720 per month of income before debt service. So if the seller is going to carry back the $100,000, we need to focus on structuring some sort of terms that cost less than $720 per month. Probably right around $500 per month at least, and that would give us $220 per month of cash flow. Decent deal.

So let's say we offer the seller, "I'll pay you $500 per month until the $100 is paid off," that's your offer. Now the seller comes back with, "I'm okay with the $500 per month but I'm not okay with the 16-plus years that it's going to take for you to pay that off." So you propose, "How about 8 years, and I'll then give you the balance on day one of the 9th year?" And that payment of the balance would be called - that would be called a balloon payment, right?

So now we've got our scenario on place and the common question is, "What are you going to do in 8 years when you still owe $50,000 on the property?" That's the big fear. That's the big fear, this fear of having to come up with a check for $50,000, right? So let's walk through this.

First of all, when that day comes and if you don't have the money to pay it off, you could just walk away. I mean, just default on the property. Give it back to the seller, then walk. In most cases that's going to be a non-recourse loan, so they'll walk. You could do that. Now, I'm not saying do this, I'm not saying do it. In fact, I'm saying, "Don't do it," but I bring it up just to point out that you're not going to die, you're not going to jail, and if you drew up your paperwork correctly, it won't even impact your credit score. Nothing is going to happen to you if you walk. It's a really crappy thing to do, I suggest you absolutely do not do this, but if you did, nothing's going to happen to you. The point being don't be afraid. There's nothing to be afraid of of putting a balloon payment in your terms. Don't be scared. There's nothing to be scared of other than there would be a person walking to Earth, thinking you're a total douchebag. That would be it. That would be the worst thing that would happen.

Alright, so speaking of someone walking to Earth though and not thinking too much of you, that actually might not even be the case in fact. I mean, the seller might even be better off for you walking away. I mean here's what I mean. That seller collected 8 years of payments from you, and then they got their property back. Now they get to sell it all over again. In this event, after all is said and done, the seller will probably make more money because you walked away than if you hadn't. Now why do you think banks lend money to buy real estate? Because in most cases they collected 20% down payment, then monthly payments for a number of years, and should they borrow or default, they foreclose and sell the property again taking in another 20% down payment and the monthly payment start all over again. And likely, the property is worth more than it was when they gave the loan on it originally, and they get to keep all of the new equity as well.

Now, I'm going to repeat that to you, don't do this, it's not good business. It's not even business, it is being a jerk. But again, keep all that in perspective that there's nothing to be afraid of and you're not going to jail, you're not going to die, and it's unlikely it would even hit your credit score, right? So now we've established that, I just like to lay that groundwork like there's nothing to be afraid of here. Now we've got that, let's move on.

The most important thing here is make sure it actually works out to be a cash flowing deal for you. Don't take on a balloon payment deal just for the sake of it, just because I said so and just because the seller agreed to it. It still must be a deal, okay? Don't disregard your normal property analysis. So that's the foundation for moving forward. Make sure it meets your minimum deal standards and that there's nothing to be afraid of, okay?

Now, that's out of the way, here's what I see most people where I see them get stuck. Let's say they get this deal under contract, they're paying $500 per month and all they can think about is having to write this big check in 8 years when the balloon payment is due. So let's look at this. Your options on this one property, okay, on this one property: you could walk away like we said, but don't do it but you could, okay? Two, second option: you could refinance the property with more conventional terms, and that could be of via financial institution, I could be Uncle Rae Rae. Number three: you could sell the property. After all, you've paid down the note for 8 years, and likely experience a little bit of appreciation along the way. There's probably a good chunk of equity in the property on a quick sale to bail you out of the loan terms would likely be very easy. Number four: you could renegotiate the terms with the seller. You could ask for an extension of payments or an extension of the term, or you could negotiate the balloon payment itself. Maybe the seller, knowing that you can't make the entire balloon payment will rather take a discounted payoff instead of taking the property back and selling it all over again. So the point here is with this one property, just the one property, you have options, and the worst-case scenario, it's not going to kill you and it's not going to send you to jail, right?

So after hearing all of these and maybe you're still a little nervous about this idea, here's where the possibilities really open up, okay? Stop looking at these balloon payments as individual entities, and look at your portfolio as a whole. I mean, is this really the only property you're going to purchase between now and when the balloon payment is due, is this the only deal you're going to do on the next 8 years? I hope not. No, you're going to keep your investing going. And with the more deals you have in your portfolio, the more options you're going to have to manage this, and all of your balloon payments. Multiple balloon payments, multiple properties of balloon payments.

Understand this. It's much easier to manage the debt on your portfolio than it is to find new deals to put in your portfolio. Here's some examples. Let's say you have 10 properties in your portfolio, and they have balloon payments coming due. It can be a balloon payment and one of those is coming due and you have nine other properties to look at as a possible solution for your balloon payment. Could you refinance one of those deals? Could you sell one of those deals? What if you have 20 properties in your portfolio? Wouldn't you have even more opportunity to manage this balloon payment? Indeed, right? Here's something I do. From the moment that I take ownership, I'll schedule in my calendar every six months to offer a discounted payoff of the loan. So every six months, I'm calling the seller and ask him for a deal. It works kind of like this, "Hey Mr. Seller! I have been paying you $500 a month for the last six months and I was wondering, I was wondering if you could use a nice big payment and we just clear this up? As I have it figured out right now, I owe you $97,000 still on the property, and I could continue to pay you $500 per month for the next seven and a half years, or I could write you a check by the end of this month for $75,000. Would you be open to something like that?" Should I end? I own $97,000 and I phrased it in a way that I can give you $500 bucks a month, or I give you $75,000 at the end of this month. If he said yes, that one question, that just made me $22,000. Now if the seller said no, then I'd say, "Okay. Just thought I'd ask," and then I'd call him again in six months and have the exact same conversation. I do it every six months until they did agree to a discounted payment, and they almost always do. You know a lot people, it sounds good when they take in the deal, they might not need the money and they like the payments, so they'll accept the payments but at some point, maybe they do need the money. Things in people's lives change. Maybe they don't want to bothered it, trying to make sure that he receives his $500 every single month. Maybe it's kind of more of a nuisance than it is, a convenience or a luxury or if it's even contributing to his lifestyle at all. So yeah, $75 grand, it's going to make a difference right here at the end of the month, I'll take it.

So I tried to take care of this loan every six months, way before the balloon payment is ever due. The balloon payment is due in eight years, I try and take care of it at month six, and month 12 and month 18. So that's another way of getting rid of the balloon payment. Just flat out, don't wait to do it. I've got some more creative ways to manage these balloon payments, and the next one, I think it's going to knock your socks off, so stay tuned.

Narrator: Real estate has produced more millionaires and billionaires than anything else. That's common knowledge. But why haven't you started? Why is real estate still an uncommon investment? Not enough time? Don't know how? Too much work? Regardless of your reason for not investing in real estate, or not investing in real estate as much as you'd like, Cash Flow Savvy has a solution. Take the first step and go to cashflowsavvy.com. Download our free investor package and get on track to becoming real estate's next millionaire. Cashflowsavvy.com.

And now, back to Creating your Epic Wealth.

Matt: Alright. During the break, I could hear the wheels spinning. You're probably wondering, "What if I don't have the $75,000 to pay off the balloon payment?" When I call the seller in that last example and I asked him if they'll take $75 grand by the end of the month, what if I don't have it? Well silly, don't offer $75,000. It's very simple. Offer $60,000, offer $50,000, offer what you do have. See, the seller can't take the property back just for you asking, but what if I don't even have the $50,000? Great, no problem. That's what the rest of your portfolio is for, to start moving debt around from property to property so you can clear one of your dead houses, get rid of it, dump it, and take the profits from that one and pay off the discounted offer on the better house. Okay, so how do you do that? Sounds good, right? How do you do that? Alright, so this is the part that it's going to blow your mind, and that we're getting really creative or getting really advanced so try and follow on that. I’ll be as slow and as detailed and as careful as I possibly can with this description. This is called Substitution of Collateral, and it's a way that you can basically do your own cash out refinances on your properties.

In the event say the bank won't approve a cash out refinance on this particular property or maybe Aunt Millie, she's all tapped out so that's not going to work, or that's not going to work. So it works like this. Within your seller-financed paperwork, you include what's called a Substitution of Collateral clause, and what this clause allows you to do is it allows you to take the debt off of one property and move it onto another. So in this example we're talking about, when you place that call to the seller, it's a $100,000 property, and after six months, I think the six months was the example, you still have $97,000 of the loan to still to pay off, right? And you offer the seller $75,000 discounted pay that they can have by the end of the month, and say the seller agreed to that. So, now you got to come out with $75,000 by the end of the month. So you’d look at the rest of your portfolio and say you have a larger property, it's got a $100,000 of equity on it already, okay? So you got a $100 grand of equity on this property over here, and then over here you have a second property, this will be a third property in this scenario, valued at $100,000 but it has a $75,000 mortgage on it, okay? So this what happens, per your Substitution of Collateral clause, you move that $75,000 mortgage from property number three over to your property number two with the $100,000 of equity, leaving you with that property number three free and clear. So you got that free and clear property number three at $100,000 bucks, that's what it's worth. So you sell it, okay? You sell it and then you take the $100,000 and you pay off the discounted price that you negotiated with the seller of the original property, property number one. So you take the proceeds from number three to go pay off number one, and then you put that $25,000 in your pocket and now you've realized your $22,000 profit from that original property. Got it? Yeah, sounds great but what if you don't have a portfolio to do this with? Exactly. That's why you keep buying.

You see, you don't buy one property, get seller financing with the balloon payment due in eight years, and then just do nothing between now and when the balloon payment is due. No, you continue to do deals, and you're going to continue along the way to score these base hits just like you do with this property, and you're going to score some home runs along the way as well. You just got to keep your business flowing, you got to keep doing deals because the more you do, the more options you create for yourself.

See, these balloon payments, they are a wonderful thing as they are a negotiating tool that enables you to buy and control more property. Much more property than you would have been able to if you had not just use the balloon payment as a negotiating tool at all. Got it? So it's going to allow you to buy and control more property. So how are you doing with this? So what are you noticing? Are you a little confused? Sound like a lot of work, I know, it might be a little more or difficult to follow along just on an audio format without seeing some visuals, but what are you thinking? Sound like a lot of work? Yeah, it is, but it's like anything else. It just takes some time to get it all dialed in. But nothing worthwhile happens overnight. No, it's a skill and skills are developed through repetition. Just look at whatever it is that you're currently good at. Have you always been good at it? Or did it take time to get to the level of expertise that you're at now? Yeah, it takes some time. It is just like that.

Now some people, they don't have the time to go learn a new skill, or they don't have the desire to learn a new skill, or maybe they don't have the desire to do all the work that accompanies that skill. And what I'm thinking of you right now, I'm not totally sure which category it is that you fall into. Now I'm not really sure why you tune in to this show each week either. I mean it could be because you're struggling to get passive income working within your investments, it could be because you have doubts about Wall Street. Is it really on the up and up, is it a level playing field? Or you're thinking, are my current investments going to actually get me to where I want to go, in the time I want to get there? Or maybe it's because you've given real estate a try like you're a believer? I'm here preaching to the choir, you've given it a go for a while but it's just moving a little bit slower than you like it to go? And quite frankly, maybe it's been a little bit more of a headache than you're expecting it to be, and you're just kind of wondering is this ever going to ease up? Is it ever going to pick up? Will this ever work?

If you've caught all of the episodes up to this point, you now know that passive income is your only shot at any sort of financial freedom, and you know that real estate is by far the most practical and dependable option for most people, and you now know that if you want to get to your financial freedom placed faster than the traditional path we've all been told to follow, you have access to leverage that is unavailable to the average person in any other investment class. The leveraging of other people's money and the leveraging of other people's expertise and effort. You see that's the rocket fuel right there that's going to make it happen for you, and all the while, you're still in control. You're not just some passenger hoping that the driver is competent and knows where they're going, no, you're in control. The steering wheel, it's in your hands, and you get to take it wherever you want to go. And all that brings us to the question, how do I do it? Right? Well, you can take all of the information that you've gained from this show, piece some of the stuff together, go do it yourself or by trial and error and just go slow. Nothing wrong with that, it's exactly how I did it. Or you can leverage an existing proven system and go fast. So you can go slow or you can go fast, what's it going to be? Your decision, slow or fast? If you want to go fast, go to CashFlowSavvy.com and download our investor package. Go to CashFlowSavvy.com, download our investor package, take a look, see if anything there resonates with you and you can reach out to us if it does. Ball's in your court. And if you're an accredited investor, and you want to play in a bigger sandbox, go to EpicWealthFund.com. You can hop on our backs and go along for the ride, and go there. You can download the executive summary, see what that's all about, or do both, evaluate, and choose the best option for you. And together, we can build your Epic Wealth.

Narrator: If opening up your financial statement each month is about as exciting as watching paint dry, [snoring] the Epic Wealth Fund may be the next investment opportunity for you. The Epic Wealth Fund invests in distressed real estate and shares the profits with its shareholders. If you're an accredited investor who has already enjoyed success elsewhere in their business or investing life and you're seeking a broader exposure to real estate in your portfolio on a passive basis, the Epic Wealth Fund's executive summary is available for your review. Go to epicwealthfund.com to review the fund's executive summary, epicwealthfund.com. Real estate investments involve a high degree of risk. Residential income and returns may vary and are not guaranteed. Past performance is no indication of future performance. Nothing herein shall be construed as investment, tax, legal, or accounting advice.

Recommended Resources:

  • It’s been great meeting you virtually. Would you like to meet in person? Our next live event is right around the corner! Go to EpicIntensive.com for the details.
  • Need money? We have secured more than $15,000,000 of funding for the Epic community, people just like you. Get access to fast cash for your real estate investing business with our “one-of-a-kind” credit-based funding program at EpicFastFunding.com
  • Need time? Work on your business rather than in your business by leveraging the time of others.  Access free information and find real estate-trained virtual assistants to help you free up your time.  Learn more at VAsForRealEstate.com.
  • Need training? The ultimate training environment for real estate investors: Version 3.0 of The Epic Pro Academy!  New look, new lessons & new content – we’ve got everything you need to know to get your first paycheck!
  • Need someone to do it all for you? If you’re an Accredited Investor, you can diversify your portfolio by hitching your wagon to our train and share in the profits. Go to EpicWealthFund.com to download the executive summary.


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